I've already paid for liability and flood insurance (had to be paid before close, I paid it 24 hours before the closing date) and now I'm being asked to sign a document basically mutually agreeing to cancel the sale.  

Give it time, this is getting shredded in court as we speak.

I’m willing to bet that PM will charge enough higher rent and collect enough late fees to basically pay for their services.

It costs me around $450 for court and service fees.

IRS Publications are fine for basic tax questions.

Only thing I'm worrying is in the event the tenant stops paying and I have to evict them, does the court make me return their deposit and the payments they've made?

A personal representative can be appointed by probate court even while the lender is going through that process.

They seem to work for landlords who have gotten judgment in court on their own without using a lawyer and have the ability to put negative information on a tenant credit report.

The topic is really broad.. and you are basically asking for "tell me everything"... so I will start off by saying that there is no way we could ever tell you everything you need to know... its just too nuanced and too many variables to possibly explain in a post.  

Not needed to file court cases.